South Korean tech stocks tumble as AI-driven semiconductor rally comes under pressure

South Korean technology stocks came under heavy selling pressure on Wednesday after a sharp overnight decline in US semiconductor shares reignited concerns that the artificial intelligence (AI)-fuelled rally in chipmakers may be losing momentum.

Shares of Samsung Electronics fell as much as 4.4 per cent in early trade, while rival memory chipmaker SK Hynix dropped up to 5 per cent, tracking a broad selloff across global semiconductor stocks.

The weakness in Asia followed a bruising session on Wall Street, where investors dumped some of the biggest names linked to the AI boom. Intel slumped 9.7 per cent, Micron Technology lost 4.7 per cent, and Advanced Micro Devices (AMD) fell 6.5 per cent.

The broader Philadelphia Semiconductor Index (SOX), a key gauge of US chip stocks, declined 4.7 per cent as investors questioned whether the massive spending on AI infrastructure can be sustained after months of strong gains.

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The latest bout of selling was triggered by Samsung Electronics' preliminary second-quarter earnings announced on Tuesday. Although the world's largest memory chipmaker reported a 19-fold jump in operating profit from a year earlier, the figures fell short of the market's lofty expectations, disappointing investors who had anticipated even stronger earnings amid surging demand for AI memory chips.

The results prompted a sharp decline in Samsung shares, which spilled over into other AI-related technology stocks before the selloff spread to US markets.

However, the losses eased later in the trading session. By around 0037 GMT, Samsung had trimmed its decline to 2.3 per cent, while SK Hynix erased earlier losses and turned marginally higher, rising 0.2 per cent. South Korea's benchmark KOSPI index, however, remained under pressure and was down 1.4 per cent.

The market reaction reflects growing investor caution after an extended rally that has pushed semiconductor valuations to record levels. Chipmakers have been among the biggest beneficiaries of the AI boom, driven by soaring demand for advanced processors and high-bandwidth memory (HBM) chips used in AI servers and data centres.

Samsung and SK Hynix dominate the global HBM market alongside US chipmaker Micron, supplying critical memory chips used in AI accelerators developed by companies such as Nvidia and AMD. Demand for these products has surged as cloud computing providers and technology companies race to expand AI infrastructure.

Despite the recent volatility, analysts believe the long-term outlook for AI-related semiconductor demand remains intact. Major technology companies continue to invest billions of dollars in AI data centres, although investors are increasingly scrutinising whether the pace of capital expenditure can justify the rich valuations of chipmakers.

The latest correction also underscores how sensitive semiconductor stocks have become to earnings surprises. With expectations running high after months of AI-driven gains, even strong financial results may not be enough to satisfy investors looking for signs that the AI investment cycle is accelerating further.

With inputs from agencies.